Can the mining industry be sustainable?

For sometime I have been wanting to address the role of the mining industry in Responsible Investment. I must confess to a vested interest in the topic as I write as a former mining engineer and mining analyst myself.

ESG pariah

I cannot think of any conversation that I have had in relation to mining and ESG in that has not focussed entirely on the negative aspects of the operations of mining companies. The issues are many, varied and generally of a severe magnitude. When mining companies get it wrong they do it in spades. As a consequence, it is almost unheard of for ESG focused funds to invest in mining. Even the best behaved miner seems to represent too great an ESG risk. Notable recent examples are the destruction of the Juukan Gorge caves and the Brumadinho mining tailings dam collapse. The industry’s transgressions is a very long list and ESG investors understandably treat mining as the Anti-ESG.

Necessary evil or prodigal child

But that is not constructive. The mining industry is a crucial part of the global economy. It is one of the starting points of all wealth creation. The climate change revolution will need much greater quantities of certain metals and minerals that were not so much in demand in the past. Global economic growth will feed demand for traditional metals and minerals as the people of developing economies develop spending power. So mining is hugely relevant to the new economy and societal development. Mining companies know this and I want to explore the positive areas in which mining can make a difference and play its part in a positive future.

There are however obvious difficulties for ESG investors. Many mine resources exist in underdeveloped countries with poor governance and widespread corruption. Digging the ground up inevitably disturbs the environment. Minerals processing is water intensive. The industry has a reputation for putting self interest way above local interest. However, attitudes and practices are changing.

The SDGs

There are 17 sustainable development goals developed by the United Nations. Many businesses, organisations and investment managers use this framework to classify companies beneficial and detrimental activities. Out of all industries, mining seems to impact on more SDGs than any other. Arguably, therefore, mining has more to contribute to meeting the SDGs than any other industry.

Let’s have a look at them one-by-one.

Mapping Mining to the Sustainable Development Goals

In this newsletter I refer to a white paper produced for the World Economic Forum which you can read in full here: https://www.undp.org/content/undp/en/home/librarypage/poverty-reduction/mapping-mining-to-the-sdgs--an-atlas.html

• SDG1 Poverty Eradication

Mining companies bring wealth to countries and employment to local people. More transparent and better controlled royalty payments can be a game changer for developing economies in terms of funding social development.

• SDG2 Zero Hunger

In addition to overall improvements in personal wealth, mining can support agriculture through improved infrastructure, better water management, and minimising land usage.

• SDG3 Good health & wellbeing

In addition to providing healthcare for local employees and their families, mining companies can and often do support community healthcare where perhaps this was previously inadequate.

• SDG4 Quality education

Mining companies need educated and qualified staff and are also often in a strong position to enhance local educational provision.

• SDG5 Gender Equality

Mining companies can set a positive example in their employment and training practices. They can also set standards in schooling and healthcare.

• SDG6 Clean water and sanitation

Mining companies need to lead in water management in their operations but they can also lead in potable water and sanitation infrastructure, sharing the benefits with communities.

• SDG7 Affordable clean energy

Mining companies are often in a unique position to create and share energy infrastructure with local communities. They may also be in a strong position to utilise clean energy.

• SDG8 Decent work and economic growth

Although mining is typically very capital intensive, there are many opportunities to increase and diversify local economies. The multinational mining companies will certainly provide better working conditions than privateer miners will experience.

• SDG9 Industry, innovation and infrastructure

Mines often need new infrastructure and can share infrastructure initiatives. They can also promote domestic research and development whilst helping local suppliers to improve standards.

• SDG10 Reduce inequalities

Companies can work with local populations to ensure that they are not marginalised and that specific social groups are not excluded from the benefits of economic growth.

• SDG11 Sustainable cities and communities

Companies can work with authorities to manage unplanned urbanisation and ensure that local services are adequate. Suitable urban planning can be done to ensure that towns and cities develop sustainably.

• SDG12 Responsible consumption and production

Miners can lead in the responsible use of resources and control of waste.

• SDG13 Climate action

At the minimum, miners can improve energy efficiency, reduce carbon footprint and engage with their indirect climate risks.

• SDG14 Life below water

Mining waste should be carefully controlled. Underwater mining should be highly restricted.

• SDG15 Life on land

Miners can apply a net-positive policy to environmental impact. They can collaborate with local authorities and groups to establish conservation policies.

• SDG16 Justice and strong

Much mining takes place in countries with weak judicial and institutional bodies. Corruption can be endemic and mining royalties can be diverted to sustain corruption. Transparent payments and third party control on the end use of funds can help to ensure that royalties are used to the benefit of society. Insistence on the operation of rule of law can help strengthen developing institutions.

• SDG17 Partnerships for the goals

Mining companies can work together at a national and local level to promote the sustainable development goals.

As you can see, there is a great deal of scope for mining to enhance the lives of people in countries that have valuable natural resources. I look forward to the time when the industry is better known for it’s positive traits over the mistakes of the past.